Project Risk Management

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Transcript of Project Risk Management

Risk Response PlanningProcess of developing options and actions to enhance opportunities and reduce threats to the project’s objectives. Assigns parties to take responsibility for each risk response.Risk Management PlanningDefinition - Project Risk ManagementFrameworks, processes and practices that are directed towards effective management of uncertainties affecting the project objectives

Project risk management - a scalable process, based on complexity, size of projects and risk tolerance of stakeholdersQualitative Risk AnalysisAssesses the impact and likelihood of the identified risks and develops prioritized lists of these risks for further analysis or direct mitigation.Quantitative Risk AnalysisA way of numerically estimating the probability that a project will meet its cost and time objectives. Quantitative analysis is based on a simultaneous evaluation of the impacts of all identified and quantified risks.Dr Seldi RubakanthaProject Risk ManagementBenefits of Project Risk ManagementMaximises project certaintyContributes to project success /meet project objectivesSystematically analyses possible outcomes/deviationsOffers better project controlHelps senior management understand challenges in portfolio of projectsRisk Types and Project RiskEnterprise RiskProject RiskTechnical RiskSafety RiskSecurity RiskBusiness RiskAny uncertainty affecting the project objectives such as:

Time

CostPerformanceQualityScopeClient satisfactionUncertainty that affects the technical objectives - performance- functionality- maintainability - reliabilityUncertainties affecting business objectives such as:ProfitabilityMarket share, competitiveness, Return of investment Internal Rate- Reputation,- Repeat work, Share priceUncertainty that affects one or more safety objectives:- Max threshold of accidents- Threshold for max lost days - Insurance premiums- Regulatory complianceUncertainties that affect one or more security objectives:- Information security - Physical security- Asset security- Personnel securityProject Risk Management StepsRisk Management PlanningRisk IdentificationQualitative Risk AnalysisRisk Response PlanningQuantitative Risk AnalysisA systematic process of deciding how to approach, plan, and execute risk management activities throughout the life of a projectRisk IdentificationDetermining which risks might affect the project and documenting their characteristics. It may be a simple risk assessment organized by the project team or an outcome of a workshop processTracks identified risks, monitors residual risks, and identifies new risks. Ensuring the execution of risk plans, and evaluating their effectiveness in reducing risk. It is an on going process for the life of the project.Risk Monitoring & ControlMonitoring and ControlDecide the level of activity- as a guide, for projects < £10m, use informal process and for projects >£20m, formal risk management process necessaryIncorporate into project management plan, allocate funds and time in accordance with level of activityMake Risk Management an Agenda for project meetings, communicate to all project team and align the team to the benefitsEstablish risk champions and leaders if the project is big, hence each section (geotech, structures, etc. has a risk lead)Define clear project objectives, start early and continue the exercise throughout all projects stages - planning, scoping, design and constructionUse appropriate techniques, threshold setting for low /high risk (based on the scale of project)Input data sources - previous database, brainstorming, questionnaires, surveys and checklistsCategorize - it is useful to categories and label the output. A detailed description of risk is necessary for wider adoption in the team. Needs to include data, trigger, risk type, possible response, etc.It is used when-an initial screening or review of project riskswhen a quick assessment is desiredthe preferred approach for some simpler and smaller projects where robust and/or lengthy quantitative analysis is not necessary.Benefits include-Prioritising risk and hence allocate resources for critical onesCan be done with small groups and only inhouse specialistSome Tips - Only invite the right participants, define terms, stay focussed & set time limit,prioritise the risk listQuantitative risk assessment yields proportionate benefits for projects > £10m in author's experienceQuantitative techniques, Like Monte Carlo or Latin Hypercube, though powerful can be misleading if not used properly Use survey questionnaires, formal/informal interviews, workshops for projects > £50m - frequency every 12m or at key milestones.Workshop success depends on good pre-preparation, right subject experts participation and skilled facilitation (workshop style must be elicitation as opposed to interrogation)Traditional risk response gets specific meaning in project riskAvoid - relax project objectives, change project plan, change, clarify brief - may be the first response to try for all. Apply to high probability/impact risks.Exploit - Opposite to avoid, apply only to high prob./impact risks. Ex. more resources to finish earlyTransfer - Involves premium payment. Insurance, contracts, warranties, premium bonds.Share - for opportunities, joint ventures, partnershipsMitigate - reduce the trigger or impact. More preventive than reactive.Enhance - increase the probability and impact hence the risk could materialise. If probability increased to 100%, then a sure opportunity.Accept - it refers to risks that remains after all above steps. Sometimes allocate resources to deal with this if occurs.This can be implemented by additional columns in the risk register for:Type of strategy (e.g Mitigation)Person responsibleDetails of action to be taken, also update the PMP for the same actionPlanned cost, Est cost avoided. Compare this with actual cost and actual cost avoided.A continuous process, mainly in commissions that run for years. The risk profile will change year to year with risks that were successfully addressed and retired.